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Given Enphase’s weak balance sheet, the stock is likely to continue to decline despite the strong revenue growth. Either Enphase will be acquired by a stronger player, or existing shareholders will suffer significant dilution as the company is forced to return to the markets for additional operating capital.

China Takeover

An acquirer might not just be one of the stronger industry players Coven pointed to. Jabusch speculates that one of the stronger diversified Chinese solar companies might look to acquire a newly cheap power conversion player. He thinks it “makes sense for a larger solar firm to want to add power control devices such as inverters, storage and distribution to their verticals,” while emphasizing that this is only speculation. ”But,” he says, “ the pieces fit, so it can’t be ruled out.”

Conclusion

Given the consensus that the shake-out is far from over, it is too early to buy into the solar inverter industry. Even likely industry survivors will continue to see deteriorating margins until the weaker players exit. Possible buy-out targets may receive a price bump on buy-out news, but any acquirer (even one from China) will probably wait for weakening industry economics to allow them to pick up their target out of bankruptcy, or at least a better price than is available today.

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